An introduction to bourbon whiskey: America’s great spirit – Part 2

In Part 1, we covered the basics of what whiskey is, specifically bourbon, and what goes into making it. Now let’s talk about how to buy and drink it!

General Buying Guidance

Unlike a good single malt Scotch, which will set you back at least $40 – $60, and can run up into the hundreds (or even thousands) for something in the 18 – 30 year age range, bourbon is an incredible bargain. Some of the best bourbons in the world cost only $45 – $70, and there are many great buys to be had in the $20 – $30 range, which is where I recommend you do the bulk of your purchasing at first. There’s plenty of drinkable American whiskey below $20, including stuff you could mix or pass off on your unsophisticated friends for less than $15, but for just a few dollars more you can drink really tasty stuff, so why settle for less?

If you’re new to bourbon, stick to bottles labeled Kentucky Straight Bourbon (or Rye) Whiskey. This means the whiskey will adhere to the minimum standards for good bourbon, and will come from the state where it originated and was perfected.

No age statement on the bottle is fine, or any age statement 6 years or greater. Like Scotch, longer aging of bourbon is generally a sign of quality, but many bourbons today are losing their age statements to keep up with demand for their products, which means they’re likely including some younger whiskey than they did before. This is not necessarily a bad thing, because a distilleries’ #1 priority for their product is to keep the flavor consistent.

Another reliable marker of durn good bourbon is the words Single Barrel. Unlike Small Batch, which is essentially meaningless, Single Barrel means that the whiskey was made from one distilling ‘season’ at one distillery, and came out of one particular barrel. The ‘Single Barrel’ version of a particular brand should be a particularly tasty barrel, which is why the master distiller has chosen it for a special bottling. For example, Evan Williams black label or the bottle-in-bond version are nothing special in my opinion, but Evan Williams Single Barrel is delicious stuff, and a fine value at around $20.

Recommendations (prices are pre-tax and represent good deals commonly found in California)

Bottom shelf/Entry-level: It’s worth tasting a couple of these after you’ve bought a few of the Middle Shelf options so that you can appreciate paying a little more for the jump in quality. Try at least one of the two best selling bourbons* in American: Heaven Hill’s Evan Williams black label or Jim Beam’s white label. Four Rose’s yellow label is actually quite tasty, and worth buying. Stay away from the really bottom shelf stuff including Ten High, Ancient Age, and Old Crow. (On the other hand, these are worth a taste for comparison, but just a taste: I wouldn’t want to be responsible for drinking a whole bottle…)

*Jack Daniel’s is the world’s best-selling American whiskey, and not bad at all, but technically it’s a Tennessee whiskey, even though process & taste-wise it’s practically identical to bourbon.

Middle Shelf: There is some great value here, and it’s where I spend most of my bourbon budget.

  • Sazerac’s Eagle Rare continues to be a steal at 10 years of age and $25. Smooth, sweet and reasonably complex, it’s both a crowd pleaser and a nice dram for the initiated.
  • From the same folks who brought you Eagle Rare, Buffalo Trace‘s flagship bourbon is also very good ($20)
  • From the Beam people, Jim Beam Black Extra Aged is not bad, but Jim Beam Single Barrel if you can find it on sale is excellent. Knob Creek (100 pf) is also very good.
  • Evan Williams Single Barrel vintages are a favorite of mine (skip Evan Williams 1783, however), as is another fine product from Heaven Hill Distilleries, Elijah Craig.
  • The proprietary yeast used by Wild Turkey in their flagship Wild Turkey 101, or the milder and more-refined Russell’s Reserve 10 year, give their whiskies a distinctive dry spiciness that I enjoy.
  • Four Roses’ entry-level ‘yellow label’ is fine to start with, but look for Four Roses Single Barrel if you can find it on sale.
  • Old Forester 100 pf is perfectly quaffable, but the really good stuff is in their Top Shelf line listed below.
  • Try a ‘high rye’ whiskey like Old Grand-Dad Bottled-in-Bond or Old Grand Dad 114 pf. (Their entry-level Old Grand-Dad 80 pf is supposed to be inferior to the bottled-in-bond, but it’s been a while since I’ve had it, so I won’t pass judgement here.)
  • For rye whiskey, try Rittenhouse Rye Bottled-in-Bond or Knob Creek Rye 100 pf if you can find them for less than $30

Top Shelf: These whiskies make a wonderful gift for a bourbon afficianado, or a treat for yourself (but don’t waste them on the uninitiated.) Move on to them after you’ve decided that bourbon really is your thing with the Middle Shelf purchases.

  • Kentucky Spirit from Wild Turkey if my favorite bourbon to date (around $45 – 50)
  • Booker’s is reputed to be excellent, and is made by Jim Beam.
  • Blanton’s is Buffalo Trace’s top shelf bourbon, and comes with a collectible plastic horsey on top…
  • Old Forester 1897 Bottled-in-Bond is delicious, and has the distinction of being my father’s favorite bourbon to date. They also make Old Forester 1920 and Old Forester Statesman, all of which are supposed to be very good. The entire fancy pants Old Forester collection is in the $40 – $60 range.

Tasting Whiskey

Tasting whiskey is similar to tasting wine & beer. Pour a small amount (0.5 oz) in a small, aroma-concentrating glass and stick your nose in there to smell it gently at first, and then more thoroughly. (Try to be as obnoxious as possible about it. You’ll enjoy the whiskey more that way.) Next, take a small sip and swirl it around your tongue before swallowing. You can also do the wine thing and breath in through your mouth while you do it, but don’t choke!

Next, dilute the whiskey down to around 30 – 35% abv (60 – 70 proof) with a little room temperature water. Cold water or ice won’t allow you to taste the whiskey quite as well. Use a pipette or small creamer pitcher to make sure you don’t pour in too much water too quickly. (Pipettes are perfect for hosting a tasting since everyone can have their own, and you can just toss them afterward.)

After diluting, take a bigger sip and hold the whiskey in your mouth longer this time, getting it all over your tongue, including the back and sides, before swallowing. Notice the initial flavor, the body or ‘mouth feel’, and after swallowing, notice which tastes linger and for how long. At the right strength, the alcohol should neither burn while it’s on your tongue nor be so watered down that it doesn’t have much flavor. Pour a little water in, sip, dilute more if needed, repeat until you get it to your taste. For me, I tend to keep diluting as I taste, perhaps because the alcohol on my tongue starts to accumulate as I keep sipping. You can always add more whiskey if you get too much water in there…

As bourbon expert Chuck Cowdery told me, “there’s a difference between tasting and drinking”, so once you’re done tasting, feel free to relax and just drink. I often find that I need to have a full glass of a single bourbon to really get to know it, which is a very convenient excuse that you can give to your wife. For good whiskies like those in the Middle and Top Shelves above, I recommend sticking to adding only a little still water, or if it’s warm out, a small piece of ice. But if you just wanna kick back and make your whiskey a ‘longer’ drink, go ahead and add that single large ice cube/sphere or even some club soda, but please, hold the Coca Cola.

Enjoy, and tell me about your favorite American whiskies in the comments!

 

An introduction to bourbon whiskey: America’s great spirit – Part 1

Bourbon whiskey is a uniquely American spirit that, along with my homebrewed cider, has become my go-to alcoholic beverage. If you just want a list of great bourbons to try, skip to my recommendations in Part 2.

What is whiskey?

Whiskey is any fermented grain beverage (aka beer) that has been distilled, which concentrates its alcohol and removes the sugars and many other flavors of the original product, but keeps enough of them to still have the distinctively sweet whiskey flavor. Fermented fruit beverages, such as wine or cider, that are distilled are called brandy or eau de vie. The latter is French for water of life, and that same phrase in Latin, ‘aqua vitae’, became uisce beatha in Gaelic, which eventually turned into the English word ‘whiskey’.

Similar to brandies like Cognac, whiskies today are almost always aged a few to several years in oak barrels. Oak happens to be an excellent wood for barreling spirits because it doesn’t leak or poison you, and aging in wood improves the flavor by contributing toasty, wood-y & vanilla-y notes. Charring the barrel, which is required for bourbon, also mellows and purifies the whiskey, removing harsher flavors over time, as well as adding unique flavors. Think of this charred inner layer of the barrel as a charcoal filter that also adds deliciousness. Mmmm….

Non-American Whiskies

Scotch, Irish, and Japanese whiskies are made principally of barley, which is also the primary grain in beer. Malt whiskies such as Single Malt Scotch are made entirely of malted barley, whereas blended whiskies can be made of neutral grain spirits (aka vodka, usually made from corn because it’s cheap) or other grain spirits. The ‘Single’ in Single Malt Scotch refers to the requirement that the spirit be made in one distillery over one distilling season (as opposed to combining whiskies from multiple distilleries or whiskies from different years of distillation.) Canadian whiskies are somewhat similar to American ones in the grains they use, especially their frequent use of rye, but they are often blended with tasteless neutral grain spirits, and thus not as characterful as American whiskies.

What is bourbon whiskey?

American whiskies include bourbon, Tennessee, rye, wheat, and malt whiskies. Depending on the style, they are made of corn (maize to those of you outside of the United States), rye, barley malt, and sometimes wheat. Bourbon is the most popular type of American whiskey, and it must be made in the US to be called bourbon (but not exclusively in Kentucky, where most whiskey comes from, which is a common misunderstanding.) Bourbon is required by law to be made of at least 51% corn, with the remainder being rye, wheat, or barley. In practice, most bourbon is made with 60 – 80% corn, 10 – 20% rye (sometimes substituted with wheat instead), and 10 – 12% malted barley. Malted grains convert the starches in the other grains into sugars during the beer brewing process so that the yeasts can turn those sugars into sweet, sweet alcohol.

Bourbon must also be aged in newly-charred oak barrels. Since these barrels can only be used once for bourbon, they are often sent to Scotland to be used to age Scotch afterwards. The fact that they are used barrels is why Scotch has a mellower wood flavor profile than bourbon.

There is no minimum aging period for plain ‘bourbon’, but most whiskey sold is ‘straight whiskey’ (or ‘straight bourbon whiskey’), and that must be aged for at least 2 years, and must display an age statement if it is aged for less than 4 years. So, if you see something like ‘Kentucky straight bourbon’ with no age statement such as Jim Beam white label, you’ll know it’s bourbon made in Kentucky that’s been aged for at least 4 years. (And probably exactly 4 years, since it’s expensive to age booze!)

You can think of bourbon as the ‘mostly corn’ American whiskey. Rye whiskey is essentially made by the same process, but with a minimum of 51% rye, and the remainder corn or barley. Wheat whiskey is 51% wheat, and so on.

The one quirky exception to this 51% rule is the rarely-found corn whiskey, which has to be at least 80% corn. Another quirk of corn whiskey is that it can be unaged, but if it is aged, it must not be aged in newly-charred barrels, but in used or uncharred oak barrels.

Bourbon must also be distilled to no more than 80% alcohol by volume (aka 160 proof), put into the barrels at no higher than 125 proof (62.5%), and bottled at no less than 80 proof (40%.) Distilling to a lower proof means that more flavor stays in the spirit, whereas neutral grain spirits like vodka are distilled to much higher proof (95%, say) which ensures that pretty much only alcohol is coming out of the still, and the majority of the grains’ flavor is left behind (sad.)

What determines the flavor of American whiskey?

Age and charred wood

The length of time spent aging in the newly-charred oak barrel makes a big difference in the flavor (and price) of bourbon. While Scotch can age for as much as 25 years or even longer in its used barrels, with some notable exceptions, bourbon generally gets too much wood flavor from the newly-charred barrels if left in them for more than 8 – 12 years. You rarely see any bourbon advertised as older than that.

Unlike wine or beer, distilled spirits do not really change once bottled, so you’re paying for the time spent in the wood, not the glass. Sugars and other flavoring compounds formed in wood when toasted and charred contribute to the vanilla, smoke, tobacco, oak, and some other flavors found in bourbon. Barrels can be charred to different levels of burned-ness, but most whiskey barrels are either a #3 or #4 char, which is the middle of the #1 – #7 scale used, #1 being the least charred.

Temperature variation

The environment that the whiskey is aged in also makes a big difference. Temperature change is key as hot summers and cool nights apparently press the whiskey in and out of the wood as the liquid expands and contracts, resulting is quicker/superior aging. Thus, the top and outer racks in the large whiskey barrel warehouses known as ‘rackhouses’ yield the most flavorful whiskey. This is why hot, dry places like Kentucky are well-suited to whiskey production whereas coastal location like Seattle or San Francisco are not. Plus, huge rackhouses require a big footprint, so cheap land is a plus.

Bourbon barrels aging in a Kentucky rackhouse

Grain

The type and proportion of grains used in the whiskey also make a difference, with corn giving a sweet flavor, which is either balanced with the spiciness of rye, or allowed to come through with the mellowness of wheat. Barley is a small component of bourbon, and thus probably doesn’t contribute too much flavor, but I would guess it’s a sweet flavor too like that of Irish whiskey. Rye whiskey is therefore generally ‘spicier’ and drier-tasting when compared to bourbon, and corn whiskey, which is often almost entirely corn, might be very simply sweet, but with little of the complexity found in bourbon or rye. Roughly 95% of the bourbons you find on the shelf will be corn + rye whiskies, and only a few, notably Maker’s Mark, Larceny, W.L. Weller products, and most famously, Pappy Van Winkle bourbon, will be corn + wheat whiskies. Some distilleries have recently experimented with ‘four grain’ bourbons, meaning they contain corn, rye, barley, AND wheat.

Yeast

The yeasts used by the distillery to ferment the corn and rye-based beer also contributes a lot of flavor, and are closely guarded by each of the major distilleries. These yeasts have often been handed down over many years, similar to an heirloom sourdough or beer yeast. The distinctive spiciness present in Wild Turkey’s whiskies is apparently due to its spicy yeast variety.

Water

Alkaline water like that which flows through Kentucky’s limestone caverns contains minerals that make for good fermentation of the beer. Distilleries like to emphasize how important their local water is for the quality of the whiskey, but that could be more because it’s a hard-to-reproduce marketing gimmick than a factor of major flavor importance.

Skill

All of the above factors, and likely others as well, make for myriad differences in the finished product. A Master Distiller and his panel of expert tasters are required to test all the barrels as they age, sometimes moving them around the rackhouse to age in a desired way. These skilled folks are responsible for combing whiskey from various barrels, or choosing specific barrels for ‘Single Barrel’ bottlings, to achieve a consistent flavor profile for all of a distillery’s products.

Whiskey producers generally use the same ‘juice’ (distilled spirit) for multiple brands (e.g.: Heave Hill’s Evan Williams vs the same company’s Elijah Craig) or product ‘line extensions’ (e.g.: Jim Beam, Jim Beam Black, Jim Beam Single Barrel). Since the yeast, grains, distilling apparatus & process, and barrels are all the same for a given ‘juice’ from a distillery, it is the age and rackhouse location differences chosen by the Master Distiller, and whatever other magic is going on post-distillation, that are responsible for the significant differences still found within a company’s brands or line extensions. This bourbon family tree gives an excellent visual representation of this. (Print it out and keep it near your whiskey stash!)

Now that you know all about what’s in the bottle, let’s start drinking it!

 

The World’s Easiest Hard Apple Cider recipe

Welcome to making The World’s Easiest Hard Cider. It’s easy, cheap, tasty, and fun!

Two simple ingredients: yeast + juice

The only special ingredient you’ll need is brewing yeast. I recommend an English Ale yeast called Nottingham that I’ve been using for the past year with great results. You could also use a cider-specific yeast, or even a wine yeast (white or champagne), or get a couple of varieties and compare the results. Buy them off Amazon using the links above, or find a homebrew shop near you.

Next, head to your local grocery chain and buy four-to-ten 64 oz (half gallon) plastic jugs of juice. You could do a minimum of two half gallons if you wish, or use two-to-five 1 gallon (128 oz) jugs, but I like the 64 oz ones because they yield about five 12 oz bottles worth of cider, which is just perfect for sharing with a few friends. Definitely go for plastic: glass jugs could be used, but I don’t recommend it because you could carbonate for too long and risk shattering them.

What type of juice to use?

Safeway’s ‘regular’ brand of apple juice works very well, as does Tree Top’s. I found that both brands’ unfiltered Honey Crisp apple juice was particularly well-flavored. Grab one jug of each type and brand and see what you like best. Feel free to experiment with other fruit juices, especially pear, which is second in cider popularity, and post in the comments about your results. The one brand that did not make tasty cider for me was Mott’s, so you might want to avoid it.

Apple juice often goes on sale for as little as $2 per 64 oz jug (especially in late fall, presumably after harvest season), and can usually be found for $3 – $4, so don’t pay too much unless you really want to try some premium juice, and stock up when it’s cheap! At $2.50 per 64 oz, your cider will only cost you 50 cents per 12 oz bottle.

Method

First-timer steps

The first time you do this you will be using your yeast packet and will need to do a couple of extra steps. The #1 thing to be concerned about when you brew alcohol is sanitation. You don’t want any stray bacteria or wild yeasts to reproduce in your cider and give it weird flavors (it won’t hurt you though, so not a big deal if it happens: just dump it out and start over.)

Take something heat-resistant with a pour spout like an 8 oz glass Pyrex measuring cup and sanitize it by either pouring boiling water into it until it’s overflowing (do this in your sink), or fill it to the brim and microwave it until it boils. (Be very careful not to superheat the water in the microwave and have it boil over on you when you touch it! Wait for it to boil while you’re microwaving, and then turn off the microwave.)

Add a metal spoon to the Pyrex cup to sanitize it also, and let cup and spoon sit for 5 minutes in the boiled water. Carefully dump the water out, leaving the spoon in the cup. Fill the cup up with about 6 ounces of 110 F (43 C) water straight from your tap (water from the tap is sanitized). You can either leave a thermometer in your boiling water along with the spoon to sanitize it also, and then measure the temp precisely, or just put your finger under the tap and use the water once it feels very warm/a bit hot on your finger, but not at all painful. (It’s better to err on the side of too cool than too hot, because water significantly above 110 F can harm or kill your yeast.)

Next, rinse off your yeast packet under the tap, just to be safe, and then open it with your clean hands and pour the powdered granules into the warm water in your measuring cup. Let them sit on the surface without stirring for 5 or 10 minutes, and then stir them in gently with your sanitized spoon until they’ve dissolved. Jump down to aerating and adding the yeast.

After you’ve already done this once and want to re-use the yeast in a jug

The best part about this method is that you can reuse your old yeast as many times as you want in future batches. All you need to do is be ready with more unfermented, unopened juice by the time you finish drinking your hard cider, so I always keep a few half gallons on hand. As soon as you’ve poured off the last of the good stuff from a jug of your cider, you should have a hard-packed layer of yeast stuck on the bottom. Open a new jug of your fresh juice and pour off about 4 – 6 oz into the old jug and slosh it around to get all that yeast off the bottom and into the liquid, then continue following the instructions below in the next section.

Your cider yeast is like a reusable sourdough starter. I’ve been using my initial Nottingham yeast for over a year now, having made several gallons of cider with it, and it’s still going strong. I’ve even given empty containers to friends and family so that they could start their own without having to buy yeast.

Troubleshooting: If you ever get a batch of cider that tastes bad (usually sour), then it might’ve gotten contaminated with wild yeasts or lactobacillus bacteria (the same kind that makes yogurt tangy.) In this case, just don’t reuse that yeast (and dump the cider, or drink it if you don’t mind it!), and hopefully you have another jug that has uncontaminated yeast. If not, just start over with a fresh packet of yeast.

Aerating and adding the yeast

Set your yeast slurry to one side. Open each of your jugs of fresh juice with clean hands and pour off about 4 – 6 oz of juice from each into a mason jar to do with it as you wish. This is to create enough air space in each jug for the yeast to foam up during fermentation without overflowing.

Next, aerate your fresh juice by recapping the jugs and shaking them vigorously for about 10 seconds. This will oxygenate your juice so that your yeast will have an easier time replicating in it. Then, unscrew the caps again and carefully pour out your yeast slurry (shake it once more to mix evenly) in equal parts into each jug. Take your inoculated jugs to a dark/dim part of your house that’s as close to 64 – 68 F as possible. I’ve made cider anywhere from 62 – 78 F, and it always came out fine, so don’t worry too much about the temperature. Put a towel under your jugs, or set them in a plastic or cardboard container in case any juice spills over during fermentation. Then, leave the caps unsealed just barely, like 1/4 – 1/2 turn from being sealed, so that the CO2 gas that builds up during fermentation can escape.

Fermentation and when to drink your cider

As long as your fermentation gets off to a good start, by which I mean you should see bubbling activity within 12 – 24 hours, the CO2 pressure should keep any bacteria from getting in. I’ve done this many times and haven’t yet had a single batch get contaminated. Godspeed!

Let the cider ferment for 2 weeks, and then seal the caps, and let it go another day or two with the cap sealed until the jugs are bulged out somewhat with carbonation. Release the pressure by unscrewing the cap and getting the jug back down to normal size, then chill in the refrigerator with the cap sealed, and then taste it once it’s cold!

If it’s too sweet for your taste, you can crack the cap and let it go a few more days or another week at room temperature again. If it’s too dry for your liking, try your next batch after only 1 week instead, and add some fresh juice to sweeten up this batch. The warmer your house is the faster it will ferment. Play around until you find the time + temperature combo that produces the flavor you like best.

If the cider isn’t carbonated enough, just leave it in the fridge with the cap on and check once a day or two. Your cider will vary in alcohol percentage from about 4 – 6% depending on how long you let it ferment. The sweeter it is the lower the alcohol because not all the sugar has been converted into booze; the driest cider will be the most alcoholic.

Plastic is very forgiving even if you over-carbonate a bit, but do crack the cap if you notice your jug bulging a lot to let out the pressure if you intend to keep it sealed in the fridge long-term. I have had a plastic jug crack under pressure on me while transporting it in a hot car over a 14 hour drive…

If you won’t be ready to drink the cider in 2 weeks, you can ferment it for a few days or 1 week and then seal it up and keep it in the fridge to slow down the fermentation. I do this if I’m going to be out of town for a week and want to have some ready for when I get back. Keep an eye on the jug bulging and crack as needed in the fridge, since your yeast will still work, just more slowly, when cold.

Drinking your cider, and what to do with the yeast at the bottom

You’ll notice when your cider has finished fermenting the yeast has, hopefully, settled down at the bottom into a hard packed layer. When serving your chilled, sparkling cider, pour it off gently to avoid disturbing the yeast, and never shake the jug. You could also transfer it into a pitcher or clean jug before serving. Reuse the yeast in your empty jug immediately (to avoid the chance of contamination) as described above to make more cider (and more, and more, and more…!)

This cider comes out fairly clean and simple in flavor, with a nice apple flavor, especially if you use Honeycrisp juice. It won’t have that funky complexity of the great French ciders, but this lazy man’s cider can hold its own with many of the micro- or macrobrewed US and English ciders that you can find in stores, and which I often find too sweet and cloying.

I like my cider pretty cold, just slightly off-dry, and with a lot of bubbles. If you or some of your guests like it sweet, leave one batch at room temp for 2 weeks, but refrigerate another couple of jugs after only 1 week to have both a drier and sweeter version. You can even mix the two versions to taste, or add back fresh juice to a dry cider for more sweetness and apple flavor (although it will mean less bubbles.) The cider is best drunk right after opening the jug. Over time a half-empty jug will lose a carbonation and the flavor will depreciate as its exposed to air, but it’ll stay fresh and tasty for at least a few days in the fridge half-empty.

Serving your cider

If you want to get fancy and do things up Breton-style, serve your cider in earthenware mugs/bowls with buckwheat crepes (known as galettes) like they do in the north of France. Cider is a great drink in spring, summer, or fall (mix it with bourbon in winter), and goes very well with food, especially lunch or brunch fare.

Enjoy, and let me know how yours turns out!

 

Focusing on workforce diversity ratios at companies is a terrible idea. Better to focus on process.

TL;DR – Many advocates of ‘more diversity’ in the workplace and in high-paying jobs like technology, are vague, misleading, and misguided in their calls to focus on the demographic ‘representation’ of a given workforce as evidence of bias. They ignore statistical ratios of qualified workers (and underestimate how tricky and complex it would be to estimate what the ‘bias-free’ workforce makeup for a given company “should be”, let alone the random factors that would cause actual ratios to differ.) Those who are concerned with potential bias in personnel decisions should instead focus on the processes of hiring/salary/promotion, and if they believe they see bias, they should investigate more thoroughly than simply arguing that “percentage female” or “percentage minority” are useful metrics to indicate bias.

What’s wrong with diversity ratios?

A number of companies have embraced the nebulous idea of ‘Diversity’, publishing statistics on how ‘diverse’ their workforce is, and publicizing their efforts to increase that diversity. It’s often unclear whether this is done out of genuine belief that having a more diverse workforce will be good for the company, or whether it’s a cynical attempt to foster positive public opinion for its products and employment opportunities, but I suspect it’s a combination of both.

What is also unclear, or in my opinion is often intentionally obscured, is what is meant by diversity, and why ratios of characteristics used to define diversity should be focused on (generally gender and race/ethnicity, but often sexual orientation or family income are mentioned as well.) Focusing on altering the racial, sexual, or [insert demographic variable here] makeup of a workforce is incredibly misguided, and ultimately harmful if actually pursued as a goal in itself.

Instead, companies and activists should focus on making sure that the process of finding, hiring, and promoting qualified candidates is free of bias. Ratios can be a good way to check whether processes are working well (unbiased) or not, but they should not be the goals themselves.

Defining diversity

First, we must determine what is meant by diversity. I would assume that the type of diversity beneficial to an organization would be diversity of opinion, experience, and thought process, but that’s not what most diversity conversations are about (and besides, it would be difficult to measure these things in a meaningful way, since they largely exist inside the heads of workers rather than in their skin pigment, parent’s W-2 forms, and genitals…) Diversity advocates usually look at gender & race (which I’ll combine here with ethnicity), and state that their goal is to ‘increase representation among underrepresented groups’ of people at a given company or industry. ‘Representation’ presumably means ‘% of the workforce’ and ‘underrepresented’ means ‘those who make up a minority as a % of the workforce’. In the US, this seems to mean anyone who is not a white male, or perhaps a straight white male. Outside of tech, white might be sufficient to categorize those who are ‘not diverse’, but since men are overrepresented in tech, it must also mean white men. (One sign that ‘diversity’ has simply become a euphemism for not being a white male is that candidates in the singular are now described as ‘diverse’, which makes no linguistic sense.) Strangely, Asians (which includes those from India for our purposes), are generally assumed to be increase ‘diversity’, despite the fact that they are hugely overrepresented in tech (and other high-paying jobs) in the US.

Computing diversity

One complication here is that under- and overrepresentation is only meaningful if we know what the expected or ‘unbiased’ level of representative should be. If I tell you that the workforce for a tech company in San Francisco is 5% black, does that mean that blacks are under- or overrepresented relative to other groups? Well, if San Francisco’s (SF) population is 10% black, you might say ‘yes, blacks are underrepresented compared to the general population of SF’, but if SF is 2.5% black, then 5% makes blacks way overrepresented relative to the general population.

However, why should the racial makeup of SF be the ‘correct’ level of representation? Tech companies hire from many parts of the US as well as abroad, and their workforces often don’t reflect the racial makeup of the cities they inhabit (sometimes to the annoyance of city officials and their residents who would like to see the locals hired in preference to others, or to the anti-immigrant crowd that believe people randomly born into the US should have more of a right to feed their families than people randomly born elsewhere.)

Furthermore, tech companies likely hire disproportionately from immigrants of certain countries (China & India, say) who move to SF for tech jobs, but less so for other jobs. So maybe we need to look at the hiring pool of qualified candidates both in the US and outside, and then compute the racial makeup of those candidates as a whole so that we know just how many of each group we ‘should’ have in our workforce. (Gender being 50-50 in general makes this much easier for the male-female divide.)

This already seems like a difficult enough task, but a further complication is that certain racial groups, genders, and countries may not be equally represented in having the skills required for a given job. This is easiest to see in a field where explicit credentials are required, such as nursing. Nursing in the US is very female-dominated, with only about 10% of Registered Nurses (RNs) being men. If we assume that 10% figure holds both for number of male nurses employed and number of male nurses with a RN certification who are looking for work, then we should not be surprised if a given hospital employs 90% women and 10% men as RNs. If one was to look at the 90-10 split in isolation, you can imagine unsophisticated diversity pundits exclaiming over the “discrimination” responsible for only 10% of RN jobs filled by men: “Male nurses are just as competent & well-educated as women, and yet for every male nurse, there are NINE female ones despite men making up 50% of the population. Hospitals are surely discriminating against men because it’s assumed men can’t be as caring or as conscientious as women in these jobs!” etc, etc.

More thoughtful people might start asking why men are so underrepresented as RNs. They might start professional societies for male nurses, non-profits to encourage men to acquire the education and interest in becoming a RN, or groups supporting men in the nursing profession at their hospital. (“ManlyNursing, a group for male nurses and those who support them!”) Others might misguidedly start calling for the creation of hospital ‘diversity boards’ to ‘encourage’ (read: browbeat) hospital staff to hire more men until the ratio of male nurses increases relative to female, or suggest a #deletehospitalXYZ boycott social media campaign.

I have no problem with, and in fact generally encourage, the efforts to make certain sectors of society more aware of and qualified for opportunities to improve their career position. Looking at employment sectors where certain groups are underrepresented might be a great way to decide where to focus these efforts. However, the fact remains that there’s nothing apparently discriminatory about a hospital employing 90-10 women to men if that ratio represents the talent pool available to that hospital.

The same logic goes for race, etc. Because of the fact that Hispanics and Blacks generally grow up poorer & less educated than Whites and Asians in America, and that family income & education are highly correlated with individual income and employment, we shouldn’t be surprised when we see Blacks & Hispanics underemployed and underrepresented in high-paying fields with respect to whites & Asians. This doesn’t mean that companies are discriminating (or that they’re not), and further analysis is needed to try to determine that*. None of this should dissuade us as a society from improving the lot of marginalized groups by addressing the root causes of poverty or lack of education, it should simply dissuade us from assuming there’s an ‘ideal’ ratio, or even an ‘improved’ ratio of gender/race mix to shoot for, or that imbalances in the workforce are equivalent with discrimination.

To come back to tech, 79% of Computer Science (CS) bachelor’s degrees awarded in 2016 at the top 5 institutions giving those degrees out were to men. Presumably that number was even higher in the past, so the workforce population with CS degrees is likely > 80% men to < 20% women. If CS degrees are a good proxy for “qualified tech workers”, then we’d expect to see about 80-20 men to women in tech, which is in fact what we often see.

(This split is similar for engineering as a whole: in 2015, 18.5% of engineering bachelor’s degrees went to women. In contrast, women obtained over 75% of of psychology bachelors, and graduate with every kind of degree, from associate’s to doctoral degrees, at a higher rate than men overall, and have since 2009.)

So, the real question becomes “why are women [or minorities] underrepresented in acquiring certain technical skills vs men [or whites/asians]?” Not “why aren’t tech companies hiring more women/minorities (hint: bias)?” This former question is a more complex one, and out of scope for this article, but it is the one that I believe companies and diversity advocates should get together on, rather than trying to shame companies in to hiring more of a certain group, which is a zero sum game at best.

Enforced ratio are clearly discriminatory

Another reason to oppose the simplistic idea of trying to enforce an ideal or better diversity ratio is that this practice in itself is discriminatory because companies would necessarily have to take someone’s race or gender into account when making hiring decisions, which is illegal and precisely the practice that diversity advocates claim they are trying to eliminate. Cynically, one could argue that many diversity advocates are not actually anti-bias in hiring processes, but rather anti-white male, and though they seem unaware of this, anti-Asian, and pro-black/Hispanic/female. Arguing that companies should hire a candidate from an ‘underrepresented’ group that they’ve deemed less qualified than a candidate from an ‘overrepresented’ group is anti-meritocratic, discriminatory, and generally outlawed by Federal law.

Diversity advocates might counter by stating that they’re merely ‘correcting’ for some underlying bias that has actually suppressed more qualified minority/female candidates from getting certain jobs. This gets into ‘hard to prove’ territory that needs much more careful analysis than is usually given. I think these advocates are at least overestimating the amount of the underrepresentation that is the result of biased hiring/promotion in favor of white (or Asian) men, and are overlooking the root causes like educational attainment, incarceration rates, and the factors that lead to these proximate causes (poverty, single parenthood, etc.)

One round-about benefit of pressuring companies to hire less-qualified candidates might be that companies would respond by trying to improve the talent level of these groups, and also that those candidates would gain the resources to improve the future talents of their offspring (at the expense of the more qualified candidate’s offspring…) The latter ‘benefit’ is of dubious value to society, but the former could be good, and can be seen when tech companies partner with non-profits like Code like a Girl. (Whether it’s the best use of resources to coerce a company to spend its resources in this way when it might not have otherwise is up for debate.)

Even if advocates were correct in their assumption of wide-spread bias against certain groups in corporate hiring decisions, the correction would be to remove the bias, not enforce discriminatory ratios that will never be tuned enough to ensure that the most qualified people are hired for a given job in a given place within a given company. One simple, non-intrusive example of how to do this is to remove names, which often give away gender & sometimes race/ethnicity, from resumes before they’re given to recruiters & hiring managers. Another might be to put more weight into phone screens + resume qualifications vs in-person interviews. (This one would be a tougher sell. Despite criticisms, interviewers, including myself, like to talk to someone face-to-face and put a lot of weight on those encounters when hiring.) Using a panel discussion format for hiring decisions made up of diverse interviewers is probably also a good practice to reduce bias (and more importantly, really helps to make better hiring decisions, in my experiences at two large tech firms.)

If you are for more equal diversity, you are against Asians in tech

Interestingly, while much has been made of ‘white male privilege’ in America, I’ve heard little talk of ‘Asian male privilege’ in tech, despite the fact that Asians are hugely overrepresented in tech. (Which I attribute to their education, skills, and ambition, not to heavy bias in their favor!) Uber recently released its diversity stats, so let’s use them as a hopefully-representative example. In 2018, Uber’s tech jobs were filled by 46% white people and 45% asian (with the remaining 9% about equal parts black, hispanic, and ‘multiracial’.)

 In 2015, about 63% of the US population was non-Hispanic white, 5% Asian, 13% black, and 17% hispanic. Compared to the US as a whole, blacks & Hispanics in Uber’s US workforce are way underrepresented (about 20-25% of their US-population representation), whites are also somewhat underrepresented (about 73% of their US representation), and Asians are way overrepresented by about 900%!

One might argue that Uber is an SF-headquartered company, and the Bay Area has a larger-than-average Asian population. The Bay Area is 42% non-hispanic white, 23% Asian, 24% Hispanic, and 7% African American. Compared to the Bay Area instead of the US, whites look roughly equally represented at Uber, Hispanics look even more underrepresented (13%), and Asians much less overrepresented (but still 200% of the local average), and blacks a bit less underrepresented (about 35%.)

Either way, it seems that Asians are vastly overrepresented, whites about equally, and blacks & Hispanics way underrepresented. Strangely, even such upstanding (but left-leaning) news sources as the Washington Post want to cling so badly to the idea that Uber has poor diversity that it falsely claims that “Uber employs a relative dearth of women and racial minorities, particularly in technical roles” [emphasis mine]. Uber’s US numbers for 2018 show us plainly that whites make up 49% of Uber’s total (tech + non-tech) workforce, even though non-Hispanic whites make up 63% of the total US population. The Post goes on to admit that “Uber employees identifying as Asian make up 30.9 percent of the ride-hailing company’s U.S. workforce and hold 47.9 percent of technical roles”, but the author is incapable of seeing how this single fact invalidates its initial conclusion.

Corporations already have a vested interest in unbiased hiring

Profit-loving owners/shareholders of large companies want to hire the best talent regardless of demographics. It is in their economic self-interest to do so, and any company that doesn’t will lose out somewhat on the talent battle to a more unbiased company.

Of course, this theoretical idea doesn’t prove anything about how companies and individuals at those companies actually hire. Just because a company loses out from not hiring the best across all demographics doesn’t mean that its agents (employees in charge of hiring) are doing what they should be. Individuals, and even private owners, have other motivations besides maximizing company value, and might indeed be acting on their own prejudices. That said, it should suggest that the default systematic behavior of most large private companies, especially corporations since they are typically owned by diverse shareholder groups, will be to make relatively unbiased hiring, salary, and promotional decisions.

Individual bias

While individual bias may play a role in seeing less women or minorities in tech, this needs to be studied explicitly. In one randomized simulation on hiring an academic, for example, significant bias was found… in favor of hiring women.

Conclusion

Ratios (or worse, quotas) of diversity should not be the goal of diversity programs. Instead, maintaining unbiased personnel processes to cast the widest net possible for talent should be the goal. One might start with a ratio and look at how it compares to the talent pool from which a company can choose from to get clues about bias, but that should lead to a study of whether bias is actually occurring, and the ratio itself should not be confused for the goal, or as a way to measure bias in hiring.

Diversity advocates should focus more on the much harder problem of addressing the (non-discriminatory) causes of workforce underrepresentation such as poverty and educational attainment, both of which aren’t neatly segmented into race and gender categories. Fair employment and well-being should be a constructive discussion about improving the lot of all humans, not one of zero sum social politics where each group’s default assumption is that the ‘others’ are trying to keep them down or hold them back.

 

Preemptory clarifications

Since this is a controversial subject, here a few clarifications of what I’m trying to say above:

  • I’m talking here specifically about personnel decisions including hiring, firing, promotions, and compensation. I’m NOT talking about workplace environments, or other forms of ‘discrimination’ like hostile work environments for women or minorities. Undoubtedly these would lead to lower-than-expected ratios of the negatively-impacted demographic group in those environments. That kind of discrimination is potentially separate from what I’m talking about (although surely biased hiring might be correlated with an unfriendly environment towards the group experiencing the bias.)
  • Hiring bias is likely not the primary driver of most gender/racial disparity among jobs in the US. Instead, educational attainment, family income, physique, cultural values (male deaths in the military), and prior workforce ratios (some of which may have occurred due to past discrimination or demographic-influenced choices, like female teachers and nurses, say) are probably responsible for more of the variation we see in employment. This is NOT to say that there is NO bias in hiring decisions as a whole, and especially not in individual hiring decisions.
  • I’ve steered clear of the debate over why women get paid slightly less than men (about 95 cents to a man’s $1 after controlling for various factors) and are less represented, along with minorities, among management ranks. (Arguing that the cause is anything other than sexism is a good way to lose a career.) Frankly, I find most arguments made by both sides of the female wage gap unconvincing. These arguments seem more like narrative fallacies to me than carefully constructed causal explanations based on clear evidence. It has been argued that some of the unexplained difference between male & female salaries and positions is due everything from biology, sexism, to women prioritizing their family lives over their careers (which again might be due to social expectations that are the result of bias/traditional values, etc.) I can see how those arguments might be true, but I can see equally how they might be entirely fictitious ‘common sense’ which will evaporate in a few decades as women continue to become more equal players in the workforce (and as men in turn take a more equal role in child-rearing and domestic duties.) In general, many arguments that have ‘explained’ why women (or minorities) historically have done, or not done, this or that have turned out to be self-serving falsehoods by the, typically, white men who’ve espoused them. (See Stephen J. Gould’s The Mismeasure of Man for a good overview of the faulty biology and anthropology that produced erroneous conclusions as a result of racial bias.)
  • From looking at education & income statistics, as well as my personal experience, I think women are going to be just fine career-wise, and that America should focus more on the impoverished, which contain a disproportionate amount of black, Hispanic, and Native Americans.  This confidence with regard to female career prospects is not meant to take away from other challenges women face such as sexual violence and unwanted advances from men. These social problems (still) haven’t received enough mitigation in society, especially outside the US.

Bulletproof Spending and Savings: Never budget again. Build wealth automatically.

I’ve been using a personal finance system for years now that allows me to know exactly how much I spend (and on what), pay all of my bills on time with zero effort, save and invest a large portion of my income. All of this takes me less than 15 minutes a week to manage on my smartphone. It’s both simple and powerful, and can be set up in less than an hour or two by anyone.

Financial expert Ramit Sethi was the inspiration for this system.

Step One – Grab a pen

On the back of a napkin, or on a spreadsheet, add up how much you spend each month on fixed expenses, things that are predictable and must be paid, and discretionary expenses, things that can vary a lot and can be delayed or changed when needed. Ignore expenses that come straight out of your paycheck like income taxes and health insurance, and don’t count any investing like 401k or IRA contributions.

Exact numbers aren’t needed. Overestimate your expenses since you’ll probably forget a few things, and it’s better to guess too high than too low. Take a maximum of 15 minutes to do this right now. Look at your online bank and credit card statements, especially year-end summaries, to quickly get an accurate estimate of your spending over the past year (including seasonal spending like winter holiday shopping and summer vacations.)

A single person who rents in a big city might have a budget like this:

Sample budget for single city person

Step Two – Take 20 minutes to set up free Capital One 360 checking and savings accounts

Do this even if you’re not ready to start the system yet. It’s free, you don’t have to deposit anything until you’re ready, and will only take a few minutes. Doing this now will make you more likely to complete the system later.

From this link, create a 360 Checking account. Pro tip: deposit $250 from your non-Capital One bank account if you wanna collect the $25 bonus. Link your other checking account either way so that it’s ready to go when you need it.

Capital One 360 Checking account Apply Now

Next, create one 360 Savings account for each of the ‘Discretionary’ categories sketched out in your budget that. If there are some categories that you don’t care about tracking individually, lump them back in with your Fixed list. I keep a separate Travel account, one for Household/Hobby items, and a few others. Limit yourself to 3 – 5 categories for simplicity. Make sure to give a nickname to each account to describe it (e.g.: ‘Travel’.)

Make sure to also set up discretionary accounts for short-term savings goals such as a future Wedding, New Car, or House Downpayment, for things you expect to purchase within the next 1 – 2 years. (Longer-term savings goals like Retirement will be handled separately.)

Finally, create one more 360 Savings account and label it ‘Short term Savings’. This will be where all of your income above your monthly spending (Fixed + Discretionary) will go. For example, if your take-home pay is $4,000 per month, and your expenses are $3,000, that extra $1,000 will be put into ‘Short term Savings’ for you to invest later.

To protect yourself from accidentally overdrafting your Checking account, click your Checking account, then click ‘Account Services & Settings’ and ‘Overdraft Settings’. Choose ‘Free Savings Transfer’ and choose your ‘Short term Savings’ account. This will allow Capital One to automatically pull money from your Short-term Savings account into your Checking if don’t have enough to pay your bills. If this should happen, you need to ‘refund’ yourself by moving money back into your Short-term Savings account from either your Checking or discretionary Savings account to replace the overdraft.

Setting up overdraft protection with a free savings transfer Capital One 360

Make sure to choose ‘Free Savings Transfer’:

Free Savings Transfer

Step Three – Redirect your employer’s direct deposit to your new Checking and Short-term Savings accounts

You’re doing great! Keep going and don’t get bogged down by the one-time annoyance of these last, crucial steps. If your employer offers direct deposit of your paycheck into your bank account (most do), set it up/change it so that your monthly Fixed + Discretionary amount is going straight into your 360 Checking account. See the FAQ below if you aren’t able to do this because.

In our $3,000/month example, if you get paid monthly, then set your direct deposit to put $3,000 per paycheck into your Checking, with the remaining balance going into your Short term Savings. If you get paid twice per month (semi-monthly), divide by two and deposit $1,500/paycheck into Checking. For biweekly/once every two weeks, multiply your monthly amount by 12/26 (ex: $3,000 * 12/26 = $1,385 per paycheck.)

(If you haven’t already, make sure to set up pre-tax contributions to your company’s 401k  with at least 10%-20% of your paycheck up to an IRS-maximum of $18,500/year (for 2018), or at a bare minimum, enough to collect any employer matching that you might be eligible for. If you use an HSA, you should also schedule automatic contributions to come straight out of your paycheck via your employer.)

Step Four – Set up automated transfers from your 360 Checking into your Discretionary 360 Savings accounts

From Capital One 360, click any account, then click ‘Transfer Money’ (top-right), and set up your ‘Monthly’ budgeted amount for the 5th of each month to go into one of your Discretionary category accounts (ex: $300 for Travel.) Do this for each of the accounts you created earlier. Make sure to first fund the account with a months’ worth of money, or schedule the transfer far enough out to give time for your direct deposit to occur.

Monthly discretionary transfers

The idea behind this is that from now on you’ll first check to make sure you have enough money in that discretionary account before you spend it.  After you spend the money, you’ll transfer the amount spent into your Checking account (or wherever the bill will get paid from.) Let’s say I want to buy a new couch that will cost $400. I first make sure that I have at least that much in my Household saving account, then I buy the couch with a credit card that auto-pays from my Checking account. Right afterward, I transfer the $400 from my Household account into my Checking, so that when my credit card bill comes due my Checking has enough in there to pay the added couch expense.

Step Five – Redirect your credit cards, payment accounts, and other bills to all get paid automatically out of your 360 Checking account

Now that you’ve set up all your accounts and recurring transfers and deposits, set up autopay on any credit cards or other bills that you have to come from your new 360 Checking account, preferably on the 3rd of the month, if you have a choice. Make sure to also make your 360 Checking account the default choice for any payment services you use like Paypal/Ebay, Venmo and Apple or Android Pay.

Go through every utility and service provider that you get a bill from and set up autopay, opting in to paperless emailed statements as well, including your landlord or mortgage company.

I try to pay all my fixed expenses with one credit card for simplicity. When I can’t pay by credit card, I use automated bank transfers, like for my public utilities, or online rent payments. (You can also get cash from your 360 Checking with no fees from any Allpoint ATM, and can request physical checks too from Capital One.)

Even rent payments to old-fashioned landlords that require checks can be automated since Capital One 360 allows you to schedule mailing a physical check using their bill pay.

You can also use a special credit card to pay for one specific discretionary category, and then set up that card to autopay straight from that Savings account. I use a ‘No Foreign Transaction Fee’ credit card specifically for travel expenses which I autopay straight from my Travel savings account, but then use a different rewards card for all my other expenses.

Congratulations, you’ve finished the one-time setup and are ready to use your new bulletproof financial system!

Step Six – Ongoing maintenance: transferring discretionary payments

Anytime you want to spend money that falls into one of your discretionary categories, 1) check to make sure you have that much in your corresponding Savings account, then 2) once you make the purchase, immediately transfer the spent amount from the corresponding Savings account into your Checking account (ehere the bill will get paid.) I use the Capital One 360 mobile app. This is the one manual step that you must do to stay on budget. Get in the habit, and it becomes second nature. You can also juggle money between discretionary accounts as needed. The only Iron Rule is to stick to your total spending goal of Fixed + Discretionary.

If you find that your estimates weren’t quite right, and you want to adjust how much you spend in different categories, or need more or less to be deposited into your 360 Checking each month, just tweak the steps above. The goal here isn’t to deprive yourself of spending money on things you love, or to meet someone else’s standards of what you “should” spend money on. Instead, you set your own spending priorities in a way that will keep you ‘honest’ on them, while allowing you to spend every dime that you’ve allocated for yourself guilt-free, since you know that your savings & budgeting is now all being taken care of automatically.

Step Seven – Ongoing maintenance: investing the Short-term savings for the long-term

You should periodically invest all of that money that will be piling up in your Short-term Savings account. Log into your investment account (or open one) and link your Short-term Savings account to it so that you can electronically transfer money.

Whenever I notice that a thousand bucks or so have accumulated into my 360 Short-term saving account, I log into my Vanguard investment account and transfer it into my Target Retirement Fund. Choose a Target fund with a year that is 15 years after your planned retirement date. E.g.: if you’re 30 and plan to retire at age 62 in 2050, choose the 2065 option. Fidelity and other money managers also have these funds. Make sure you’re paying low fees (less than 0.2% is ideal) and are broadly diversified.

There you have it. In just a couple of hours you’ve completely changed your financial life so that you know exactly how much you’re spending each month (without any ongoing budgeting), and have put yourself on the path to saving for financial independence.

Closing Thoughts

Each year, or whenever you have big money changes (have kids, buy a house, get married, change jobs), you can review your plan and adjust as needed, but try to set something that you’ll stick with for a long time so that you can truly be following the plan that you set for yourself. For me, sticking to my original budget that I set for myself 6 years ago has become a [nerdy] financial challenge that’s allowed me save more and more as my income has increased while keeping vmy spending constant. (But I’m definitely not depriving myself; nor should you! There’s still plenty of room in my personal budget for my hobbies, trips overseas, whiskey, and nights out with the lady or friends. Instead, the budget forces me to build DIY skills and prioritize what’s most important in my life.)

Recommended optimizations – Get cash with no ATM fees anywhere in the world

Whew… We’ve covered a lot of ground, but there’s one more item I recommend doing. If you use cash for some of your expenses, set up a Charles Schwab Investor Checking account. You can then use that to withdraw money from anywhere in the world and Schwab will refund your ATM fees at the end of each month. You’ll have to set up a Schwab brokerage account too, but there’s no obligation to fund or use it. (I don’t, and I’ve had the account open for years with no problems.)

I like to use cash as my going out/eating out/fun money so that I don’t have to worry about transferring money to my Checking every time I want to eat out or buy a drink at a bar. There’s also something about physically seeing the ‘pocket money’ I have for the month that helps me mentally plan out what I can spend. To make this easy, I add one more direct deposit step that sends my cash to my Schwab checking account each pay period. For our $3,000 example, let’s say our Single Person wants to use $250/month in cash to pay for Going/Eating Out. Instead of creating a Capital One 360 Savings account for that, their direct deposit will send $250 straight to Schwab from their paycheck, and only $2,750 to their 360 Checking, with the balance still going to Short-term Saving as before.

Now, they just use their Schwab ATM card whenever they need cash (and will get a ‘hard-decline’ by default if they run out, which is free, but could be embarrassing if you’re using the card as a debit in a public setting :). Just use your credit card as a fall-back and transfer money later if this happens!)

FAQ

Q: What if my employer doesn’t offer direct deposit / they don’t allow me to specify a fixed amount to go to one account and the balance to go to another / I’m self-employed?

A: Just deposit your whole paycheck into your 360 Short-term Savings account. Then, within Capital One, click any account, click ‘Transfer Money’, and schedule a monthly transfer of your monthly budget amount (ex: $3,000) at the beginning of the month from your Short-term Savings to your 360 Checking account:

Capital One 360 Transfer from Savings to Checking

Q: Do I have to use Capital One 360 for this system to work?

A: Ally Bank will work for this system too. Whichever bank you choose must let you create multiple savings accounts for free with no minimums, AND schedule recurring automated transfers between accounts. Feel free to suggest other banks that meet these requirements and that you have personally used in the comments.

Q: Why schedule the transfer for the 5th of the month?

A: Scheduling for the 5th of the month will help group all your monthly bills together, ensure that any end/1st of the month paychecks have time to hit your account beforehand, and that 1st of the month bills like rent get paid first. You should also set up your credit card(s) and, if possible, other bills to be paid around the 3rd or 4th, just prior to these transfers.

Q: What if I’m retired?

A: Just treat your fixed income, such as social security or a pension, as your ‘paycheck’, and deposit it in the way described above. If you’re also drawing down your personal retirement investments, you can set up monthly recurring withdrawals to fund your checking account.

Should we just let all the immigrants in?

My girlfriend and I recently moved from my home town of Seattle, Washington to northern California. In the Bay Area, even more so than in Seattle, immigrants of all kinds, but especially Hispanics, dominate the human landscape. I already had a pro-immigrant bias before moving here, but I’d like to share a few observations that have made me even more in favor of working out a way for as many foreigners as possible to come to the United States to live, work, and enrich their lives and our society with their contributions.

I rented a 15′ Uhaul truck with a tow dolly for my car, and with the help of my power-lifting girlfriend and a few friends, loaded all our worldly possessions into it and drove the 850 miles to our two-bedroom apartment in Palo Alto.

Not wanting to saddle my hapless love with yet another day of carrying heavy things, I drove to Home Depot the next morning to hire some help. A couple of middle-aged Hispanic guys were chatting together in the parking lot, and I asked if they new anyone who’d be willing to help unload a moving truck for $20/hour for what I estimated would be a 3 – 4 hour job. One of them asked what I was moving, and after I described the two queen beds, couch, and other assorted furniture, he said he was game, and I drove us back to the apartment.

Jose, I’ll call him, worked tirelessly with me, hauling everything up carefully, only accepting some bottled water as a benefits package, and politely declining my invitation for lunch. He said little, but worked hard and continuously, clearly having done this before, and offered wise, laconic advice on the proper way to turn a chest of drawers, or to rotate a box spring into the house. We finished in record time, about 2 hours, after which I drove him back to Home Depot and rounded up his wages to $80 as a token of his industriousness (and with admonitions of my girlfriend not to ‘exploit’ our new worker ringing in my ears. She is less enthusiastic of being a part of the job-creating class than I am.) Jose gave me the first smile of the day, thanked me, shook my hand, and went on his way.

Jose spoke English decently, and told me in our brief conversations to and from his erstwhile job site that he had lived in East Palo Alto for 10 years in a bedroom he rented for $1,000 a month; it was $500 only 4 years ago, but inflation has crept up everywhere in the Bay. Jose did mostly carpentry and other construction work, and sent money back to his family in Mexico. He indicated it was too dangerous for him to be in Mexico, but said his family was safe when I asked about them.

I have no idea whether Jose is here legally or not, and frankly I don’t really care. I needed someone to do tough, brief work with me ASAP for a reasonable price, and Jose came through in spades. This was the first time I’d ever hired a day laborer, and it worked out wonderfully.

This story illustrates what I’ve observed from varying distances hundreds of times: most immigrants to the United States work honestly, intelligently, and hard, often harder than native-borns like myself, either because they have to or because the ones who attempt to come here are more motivated and skilled than those who don’t.

The immigrants I know in America include:

  • The Hispanic yard maintenance guys shoveling dirt out of a pickup truck on Thanksgiving day while I strolled by leisurely after eating a gut-busting turkey dinner with my family.
  • My very bright and thoughtful Indian data analyst colleague who earned his Masters in the midwest, studies American politics more closely than I do, and told me about his trip with his friends to Glacier National park, describing a spot that was the “most beautiful place in the world” that he’d ever seen. He fortunately beat the odds in the H1-B visa lottery, managing to win a 3-year extension to his visa, despite only a 40% chance. I feel bad for the other 60% working just as hard and intelligently as him, and contributing just as much in economic surplus and taxes, who had to disrupt their productive lives and relationships in the US and return home through no fault of their own.
  • The Mexicans migrants in wide-brimmed hats picking strawberries in the 100 F heat with while I roadtripped in air-conditioned comfort down to Monterrey Bay to enjoy a county fair last weekend, stopping at a farm stand to buy some of the delicious, hand-picked fruit for a song.
  • Countless other other coworkers, neighbors, restaurateurs, Uber drivers, friends, and friend’s parents, all of whom came to the US seeking a better life for themselves and their families, and most of whom found it.

I also think about the would-be immigrants whom I’ve had less contact with, but whose stories are even more poignant in their rejection. I met a thin, boyish-faced man of about 40 in a rural village in the Philippines who was the youngest son of a mother who emigrated to the east coast of the US 15 years ago to work as a nurse. His dream all these years had been to join her there and live and work in America. He worked in construction and carpentry in the Philippines where wages are about $6 per day for unskilled day laborers, and stressed how he could have, and would have, done nearly any type of work in the US in order to move there. After finishing his story, he stared off wistfully for a few seconds, and then stated simply that he’d given up on his American Dream. His annual visa applications had been rejected year after year, despite his mother and her stateside friends’ entreaties on his behalf, and he had decided that fate–or more likely God; the Philippines is very Catholic–clearly did not intend for him to make the move.

My weekend to the Monterrey fair ended with a rodeo. The audience was probably 80% Hispanic. One announcer narrated in English, and the other in Spanish. Both the Mexican and American flags were presented, and both national anthems were played. The bronco riders were a mix of brown and white faces, and were cheered by all. Four white US servicemen performed a bull-dodging stunt while surrounded by rings of fire, and a European bullfighter had been flown in to leap impressively over a charging bull (three times!) It was the only US spectator event in my memory where as a white person I’ve been in the racial minority, but I felt perfectly welcome. The mariachi bands, elephant ears, tacos, 4-H exhibits, crowds of happy families, and the mix of languages all blended together for a uniquely enjoyable American experience.

That fair was a microcosm of how I view immigration to America: there are many pillars of the American system that people come here for and that are mostly enjoyed and revered by all of us. The elephant ears, corn dogs and wooden roller coasters are the rule of law, freedom of, or from, religion, and a peaceful political process. Other things that immigrants bring to America may not be for everyone (spicy salsa, or burkas, say), but as long as they don’t violate the rights of others living in American, we tolerate them peaceably, even if we view them with suspicion (deep-friend Twinkies, say.)

The real win is when immigrants bring something new and valuable to this country, as they have done for hundreds of years. Just consider food and drink alone, which I’m prone to do…:

The Germans brought beer (God bless them!), the Italians pizza and pasta, the Scottish whiskey, the Jews, in league with the Irish, corned beef and cabbage. More recently the Japanese brought sushi to our collective table, the Chinese gave us dim sum as a hangover-curing brunch alternative, and from Mexicans we obtained the taco, which is probably the most revolutionary thing to come out of Central America since Pancho Villa.

I rest my case: Viva la inmigración!

All of Jeff Bezos’ Amazon Letters to Shareholders together in one PDF

For your reading pleasure and business edification, here’s the complete set of Amazon Shareholder Letters penned by CEO and founder Jeff Bezos in one handy PDF file:

Jeff Bezos – Compilation of Amazon Shareholder Letters 1997-2016 – FINAL.pdf

This volume starts with the classic and first 1997 letter to the 2016 letter, which just came out. Bezos is known for his clear and profound thinking about business generally, how to delight customers, and how to build and sustain an incredibly innovative enterprise.

(Special thanks go to the good people that maintain the free version of PDF Split and Merge which I used to compile this, and to whomever already did the work for letters from 1997 – 2012.)

Ward’s 2016 Washington State, King County, and Seattle voter’s guide

Washington State’s November 2016 election ballot is chalk-full of important initiatives that require careful consideration.  I’ve given them that, and give you my recommendations below.  With one exception, this guide will NOT cover individual candidates, as I believe that territory is too divided along partisan lines.

5 minute voting guide

Seattle

WA State

  • STRONG YES on Measure 732 – Make polluters pay their fair share for putting our collective home, Earth, in jeopardy via a proven and effective carbon tax. 732 reduces taxes on non-polluting things to boot!
  • NO on Measure 1433 – $15 minimum wage for WA state: This one requires a lesson in microeconomics that is not easy to deliver in a couple sentences: High minimum wages cause the least-skilled & most vulnerable (poorer, younger, less-educated) workers to lose jobs. This isn’t just theory, it’s already happening in Seattle due to the jump to $11 per hour. I discuss this one more below.
  • YES on Measure 1464 – Campaign finance reform with restrictions on lobbying by former politicians. Also restricts donations from potential state contractors and others with sleazy, non-democratic interests.
  • YES on Measure 1491 – Reasonable tool to try to reduce firearms access for those in imminent danger  of hurting themselves or others, complete with constitutional protections based on existing legislation for restraining orders. Don’t worry, the state can’t simply walk into your house and take your guns on a whim, I promise.
  • STRONG NO on Measure 1501 – Don’t believe the title of this bill; it’s a misleading scare entirely bankrolled by a very strong union (the SEIU) to hide its public employees from public record to keep these employees for learning about their rights. Seriously. It’s ugly. The Seattle Times explains.
  • STRONG NO on Measure 735 – Does nothing regarding Citizens United/corporate influence in politics, but has some harmful suggestions such as removing non-profits from lobbying. The Seattle Times explains.
  • YES on the Advisory votes 14 and 15 – Doesn’t do anything binding. Recommends maintaining consistent, already-passed tax policies.
  • STRONG YES on Senate Joint Resolution No. 8210 – A governance ‘good house-keeping’ bill with no one opposed to it.

King County

  • YES on both Charter Amendments 1: make Prosecuting Attorney a nonpartisan office, and 2: update the 1950’s-era Charter language to make it gender-neutral: councilmember instead of councilman, etc. Turns out women serve in government too.

STRONG recommendations are based on how clear the evidence & likely outcomes of a decision are to me. They have nothing to do with how important the measure is.

Candidate Recommendation

I STRONGLY RECOMMEND Brady Walkinshaw for US Representative in District 7. He’s for 732, speaks intelligently and correctly on a wide range of issues, is whip-smart (Fulbright scholar, Princeton alum), has made big impacts in local government around improving the lot of the mentally ill, reducing our prison population, and improving the environment. He’s also 32, and would be the youngest member of congress, and might actually know how to use the internet.

Brady worked for the Bill and Melinda Gates Foundation for several years, which is know for its rigorous, evidence-based approach to uplifting people. He also seems humble, pragmatic, and especially willing and able to work with Republicans–both candidates in this district are Democrats– to get things done. I also had the pleasure of meeting Mr. Walkinshaw at a “town hall” event, and was extremely impressed.

More thoughts on the initiatives

YES YES A THOUSAND TIMES YES on 732 – carbon tax

Carbon taxes, along with ‘cap and trade’, are the smartest kind of global climate change legislation. A similar carbon tax has been working successfully already in British Columbia. This bill is also revenue-neutral, which means no extra taxes, and no budget cuts either (or at least very small ones either way, depending on how the math works out.) Businesses will now pay for their pollution costs, but they and their consumers (read: us!) will get a break on producing and buying pollution-free goods. Those on the left that oppose this are either fools or hypocrites, or both.

NO on 1443 – $15 minimum wage in Washington state

Don’t, through good intentions, close the door on the lowest-skilled folks in society by forcing their cost above what businesses would pay. High minimum wages cause the least-skilled & most vulnerable (poorer, younger, less-educated) workers to lose jobs because they can’t get jobs at the (lower-than-new-minimum) wages that employer’s would be willing to pay them. Thus, these folks lose, and employers hire a few less workers, who are more skilled, at the higher minimum wage. Employers might also automate a little more and do other things to reduce their labor needs.

This is happening in Seattle already, as explained here.

Help the working poor instead by improving their skills (education, job-training & vocational programs), providing cost-effective services (health & child care, which might also make poor children more socially mobile), and allowing the poor to keep more of what they make (income tax reductions for the poor & things like the Earned Income Tax Credit.)

Another overly-simplistic way of looking at this is that I’d rather pay 10 people $9/hour then 9 people at $10 per hour and have the least skilled guy be unemployed.

My background and biases

I have an MBA from the University of Washington, focusing on economics & finance, and two degrees in Physics. I’ve worked as a financial advisor, data analyst, and engineer. I’ve researched each measure thoroughly, spending about 12 hours total on the entire process, and have consulted several sources*.

What I believe in

Utilitarianism: I believe every individual’s well-being is of equal intrinsic value, be it a Washington voter, a felon, or an African living halfway across the world. The goal of policy should be to promote the greatest happiness across the greatest number of people**.

Libertarian paternalism: I also believe that individuals themselves are usually the best judge of what will make them better off, and that ‘freedom’ (bounded by laws to protect others’ liberty) and markets (i..e: collective free choice) are the defaults that usually lead to the best outcomes.  That said, institutions can improve humanity’s collective lot further by shaping choices to help individuals in areas where we know humans do badly for themselves, including cases of addiction, mental illness, or more mundane mental problems like laziness or poor statistical reasoning (automatic 401k contributions are brilliant, for example.) Also, there is room for governments to engage in wealth redistribution or other measures that boost the total world’s well-being, after adding up the social costs & benefits.

I generally favor more choices for people as opposed to fewer. I also believe society should often reallocate its resources to the people who have the least in the world, being careful not to create bad incentives that decrease our prosperity net of distributive benefits. The simple fact is that the amounts given up by the well-off often does much more good when received by the worse-off. For example, $3,500 can save a life in Africa, but will barely get you a college quarter’s tuition in the United States.

Footnotes

*Credit for my conviction, or rather conversion, against high minimum wages goes to my microeconomics & finance Professor Edward Rice, who held a riveting lecture on Seattle’s $15 minimum wage law prior to that vote last year. He and the majority, but certainly not entirety, of economists and their studies on the subject finally convinced me that high minimum wage laws (defined as, say, > 50% of the poverty level), well-intentioned as they might be, actually hurt the working poor, and society as a whole.

**Technically, I would amend this to ‘the greatest well-being for the greatest number of sentient beings’, which would include animals that can suffer/feel pain. As Jeremy Bentham said, “the question is not, Can they reason? nor, Can they talk? but, Can they suffer?”

***A good explanation of how inefficient & costly rail, and unfortunately, other public transit systems are, can be found here, and light rail specifically here. My one criticism of this analysis is that the author doesn’t account for global climate change externalities (which he DOES incorporate others), but I suspect that would make little difference in the calculations and conclusions. All hail the carbon tax & flexible, cheaper bus system instead!

How does your credit score stack up against the average for your age group?

I ran across this article while trying to find some data on average/median credit scores by age group.  They had a handy graph (see below), courtesy of my favorite free FICO-like credit score site, Credit Karma.

Why should you care about your credit score?

As financial writers like Ramit Sethi have pointed out, your credit score is crucial when it comes to saving BIG BUCKS on loans (via a lower interest rate) for items like cars & homes.  Additionally, folks ranging from landlords to employers to cable companies are using credit score to evaluate you, so keep your credit score high!

What the data says

As you might expect, credit scores tend to increase with age.  Those aged 25 – 34 have an average credit score of about 650, while those over 55 have an average of about 725.

Another useful metric is the FICO median credit score for the US, which is 723.  (‘Median’ means 50% of people have a score below 723, and 50% have one above, whereas average just combines everyone’s score & divides by the total population, which allows really bad, or really good, scores to move the average a lot more than they’d move the median.)

Since the median method of calculation keeps terrible scores from dragging down the average (which is probably why it’s higher than the average score shown in the chart below), this is probably a better measure to benchmark yourself against if you’ve never had any terrible credit history (default, bankruptcy, foreclosure, etc.)

So, where do you rank?

I recommend you get your credit score by signing up (quickly, and with no hassles or gimmicks!) for a free account at creditkarma.com.  (I’ve used them to check my score every year or so for the past few years, and have been very happy with their site.)

Anything over 750 range is good, with a good goal being around 780 or above.

Check out the above-linked article from Ramit Sethi on how to improve your credit score if it needs a boost!

2013 retirement account updates – IRS contribution limits increase for IRAs and 401ks!

IRS contribution limits for 401ks/403b plans will increase to $17,500 in 2013 (up from $17,000 in 2012).   The 50+ age group can contribute an additional ‘catch up’ amount that will remain at $5,500 for 2013.

Additionally, Roth IRA contributions will increase from $5,000 in 2012 to $5,500 for 2013 for those under 50, and $6,500 in 2013 for those 50+.

For those boss ballers making six figures (nice work!), the Roth IRA contribution phase-out range is Adjusted Gross Income (AGI) of $112,000 to $127,000 for single tax filers, and $178,000 – $188,000 for married filers.  This basically means you can’t make ANY Roth IRA contributions if your income is at or above those levels.  If you’re close, check with your accountant, or crunch your AGI numbers in a program like Turbo Tax come January/February to determine if you can make any contributions for tax year 2012.

Keep stashing as much cash as you can in those tax-advantaged retirement vehicles!

Details: http://www.irs.gov/uac/2013-Pension-Plan-Limitations